Unpacking bank lending behavior: Macroeconomic and financial drivers of credit standards in the Philippines

This study investigates the determinants of credit standards among commercial banks in the Philippines, a critical aspect of financial stability and monetary policy transmission. Utilizing data from the Bangko Sentral ng Pilipinas' Senior Bank Loan Officers' Survey and macroeconomic indicators from 2009 to 2024, a stepwise multiple regression analysis was conducted on 640 observations. The objective was to identify significant regressors of both overall and specific credit standards. Findings reveal that inflation rate and past-due ratio (PDR) lead to significant tightening of credit standards, with PDR exerting the greatest influence. Conversely, GDP growth rate, capital adequacy ratio (CAR), and return on equity (ROE) lead to significant easing. Collateral requirements and loan covenants were identified as the most regressed specific credit standards. This research offers valuable insights into bank lending behavior, providing policymakers with empirical evidence for managing credit supply, mitigating financial risks, and ensuring banking system stability.